Computerized stock trading is a way to trade on autopilot that can all be handled by using different types of trading orders that will execute your trades automatically. Essentially, your computer is trading on your behalf with your best interest. This can all be easily done right on your computer screen anytime (day or night) by properly setting up your trading orders and electronically submitting them directly to your online broker.
Your computerized trading system can be like having your own“personal trading assistant” where your trades are being traded on autopilot.
By becoming a good technician of how to work with the different types of trading orders, it will allow you to be free from your computer so that you don’t have to worry about being in front of it all day long watching the price of your stocks bounce all over the place.
(to learn more about trading orders, click on types of trading orders)
Benefits Of Running Your Trading System On Autopilot
- Better matches your desired trading style to your personal lifestyle
- Trade the markets at your convenience and only on your own terms
- You enjoy trading, but have other time consuming obligations
- You will be on vacation and don’t have the time to sit in front of the computer and watch the financial markets all day long
- Can be used for any type of trading style (day trading, swing trading, trend trading or position trading)
- And, A Real Big Benefit – can take the emotional aspect out of trading which can often lead to making poor trading decisions and incurring unnecessary losses
Trading On Autopilot Scenario
Let’s say that you have done some stock research on a company (whether it’s technical analysis or fundamental analysis) and you are interested in making a trade that you have identified as having a good risk-to-reward potential, but you will be very busy in the coming days or weeks to spend any time watching and following the trade.
According to your stock research, you have determined the price at which you would like to buy the stock as well as the acceptable profit target amount. In addition, you have also determined the maximum amount of loss that you are willing to accept just in case the trade doesn’t work out as planned.
Based on your research, the following is your profile for your trade setup:
- Profit Target: $4.05/per share
- Buy Price: $27.00
- Maximum Loss to Accept: $1.35/per share
In this scenario, you are willing to buy the stock for $27.00 with a profit target of $4.05 per share. However, just in case the trade goes against you, you have decided to accept a maximum loss of $1.35 per share. The risk-to-reward ratio is 1:3 for this particular trade and is in-line with your profit target expectations and risk management rules according to your trading plan.
So, if this trade hits $31.05, you will be out for a profit of $4.05 per share. If this trade goes against you and falls to $25.65, you will be out for a relative small loss of $1.35 per share.
How To Setup Your Computerized Trading System To Trade On Autopilot – In 3 Easy Steps
Step 1) Buy the stock at $27.00 using either a market order, limit order or buy stop-limit order
Step 2) Use an advanced order “one-cancels-other” to enter both the price at the profit target amount ($31.05) and the price at the maximum loss amount ($25.65). Once either side of this order gets executed, the unexecuted order will automatically be cancelled.
Step 3) If day trading use a day order. If holding positions for a longer period of time of more than a day use a “GTC” (good til cancel) order
(note: if the trade doesn’t hit your profit target or loss limit within your desired time frame, whether day trading or holding longer term positions, you can always consider canceling the open advanced order (in our scenario, one-cancels-other) and then sell your open trading position with either a market order or a limit order)
(note: depending on your online broker’s trade order system, you can either submit one trade order or you may have to submit two trade orders to accomplish the above scenario for trading on autopilot. If your online broker offers a one trade order system that can handle all the elements of your trade setup, you can then just enter your: buy price, profit target price and stop loss price – all on one trade order. For online brokers where you have to use two trade orders as to their own trade order system, follow the steps outlined as above. Regardless of using either one trade order or two, the concept is all the same)
Summary About Trading On Autopilot
With learning to use different types of trading orders, you can setup your computerized trading system to automatically trade for you at your own discretion and convenience that will be looking out for your own best interest.
Your computer can essentially execute all of your trades for you as if you now have your own “personal trading assistant.” This will allow you to be free from being in front of your computer and having to watch and monitor your trading positions all day long or even on a daily basis for longer term trading periods.
